I use a lot of flash skins for my Cowon D2 which supports lyrics too. And the Koreans love karaoke and the community is very productive in creating skins and applications for the Cowon D2 like lyrics downloading tools which I never used though. If you are korean by chance you wont have troubles using them, but the UI looks simple to figure out how it works.

Minilyrics could do that through so call iPod lyrics downloader (it can load lyrics for folders as well as files from iTunes library):http://www.crintsoft.com/help-iPod-Lyrics-Downloader.htmThough maybe you have to pay for this program to use that feature (can't remember exactly, but price is not very high though)